The Ever-Evolving Nashville Market
Nashville continues to be a city on the rise. More and more we are hearing these questions from our clients: 1) How many hotels are enough and 2) Can Nashville sustain the growth? Of course that question has been asked for the past 5 years as more restaurants and hotels enter the market. Last March we reported that 3,521 hotel rooms were under construction. Today, with only 42% of those rooms still under construction, that number has grown to 5,566 according to the Nashville Convention and Visitors Corporation pipeline report. That aggressive growth has not deterred developers from continuing to look to Nashville as a site for more hotel properties. However, banks and conservative owners are beginning to take a longer look at projects in the market.
As of the October 8th Nashville Convention and Visitors Corporation Pipeline report, there were 5,566 hotels under construction in Davidson County. Of those, 42.9% or 2,391 of the rooms are for full service properties while 57.1% are dedicated to limited service properties. A reasonable amount of properties are distributed throughout Davidson County. That said, of the rooms under construction, 3,226 or 54.9% are going into the downtown market. In the properties going into downtown Nashville, 1,716 or 53.2% rooms will be for full service properties while the remaining 1,510 or 46.8% will be in limited service hotels.
To date, the market has shown a need for the properties that have opened or are soon to open. Demand is increasing in the market and looks to be on a path to continue to grow. As an example, according to the Nashville Convention and Visitors Corporation, 14 conventions were hosted in Nashville in 2017 representing 135,000 room nights and 68,200 attendees. By comparison, 2018 has seen 19 citywide conventions, 207,000 room nights and 106,400 attendees. These numbers show a 53.3% increase in room nights and a 56% increase in attendees. Additional visitors bring added tax collection, as well as an increase in visitor spend in restaurants, venues, and retail outlets among other things. In addition, the NCVC reports that 2019 is looking stronger than 2018 with a current increase year over year of 119% in room nights alone.
Outside of convention pressure, additional visitors are coming to Nashville for work or fun, creating more pressure on the market. Nashville International has had one of the busiest years in its history. The addition of the new British Airways flight has been one of the airline’s most successful additions, prompting them to increase non-stop flights to London from 5 days per week to 7 days per week, in the shortest time ever reported. Nashville International is expected to reach 23 million passengers by 2041. By comparison, 2017 reached 14.1 million passengers.
Vacation rentals, which have been a disrupter of the hotel industry and certainly have taken a strong foothold in the market, have not yet shown the overall impact on the hotel space that was originally expected. According to AirDNA, there are 4,848 active Airbnb listings in the Nashville market through September, 2018. January 2018 – September 2018 those active properties ran an occupancy rate of 45.8%, while according to STR, Inc. hotels in Davidson county ran a 75% occupancy over the same time period. This is not to say that vacation rentals have not shifted share of visitors coming into the market who might have stayed in a hotel but it has been a less impactful shift up to this point.
The statistics above certainly point to a need for the hotels under construction and would suggest that, for the foreseeable future in a normal economic environment (please no messages asking us to define “normal”), the growth of hotels in the Nashville market can be sustained. Will current and new hotels and restaurants need to be more visible in the market than they have been in the past? Absolutely. There is no question that properties will need to be nimble, savvy, and skilled when it comes to being heard above the noise in a growing market like Nashville.